Japan FinTech Observer #53

Welcome to the fifty-third edition of the Japan FinTech Observer, and a happy new fiscal year! There was a raft of announcements last week, and we definitely expect a lot more crossing our desk over the coming days. Please fasten your seatbelts!

Here is what we are going to cover this week:

• Venture Capital & Private Markets: Nomura has invested in Teamshares, a U.S. based startup company that offers an employee ownership succession model; J. Front Retailing, the Development Bank of Japan, and Ignition Point Venture Partners have jointly established a business succession fund; GMO Financial Gate invests in Soft Space, preceding the latter's planned Series C funding round; Crowd Credit and Helicap have signed a new partnership agreement; 0G Labs completed their $35M seed fundraise that included gumi Cryptos Capital; MUIP participates in USD 47m Series C for omni-channel InsurTech Qoala; Indonesian e-wallet LinkAja secures strategic investment from Mitsui; Daiwa Securities will acquire a minority stake in Ambit Finvest
• Insurance: Mitsui Sumitomo Insurance Company and Aioi Nissay Dowa Insurance have jointly issued catastrophe bonds in Singapore covering domestic natural disaster risks in Japan
• Banking: Sumitomo Mitsui Banking Corporation will begin offering “Social Deposits” for corporate and individual customers in Japan; Sumitomo Mitsui Financial Group also plans to enhance its initiatives for sustainability; Nomura, SMFG and MUFG announce employee stock (option) plans
• Payments: PayPay has started providing the “PayPay Funding” service for PayPay merchants; JCB and Toyota Coniq Alpha will implement a “Loose Linkage?” proof of concept to give users control over their data; Hitachi Payment?Services has completed the deployment of 10,000 white-label ATMs in India
• Sustainability Frameworks: the FSA has published the ”Basic Guidelines on Impact Investment (Impact Finance)” after a public comment period last year; Japan Exchange Group has published a “Survey of TCFD Disclosure Using Generative AI", the first to benefit from expanded disclosure requirements in force since last year; the Sustainability Standards Board of Japan (SSBJ) has aligned the Japanese standards with the ISSB’s IFRS Sustainability Disclosure Standards
• Capital Markets & Asset Management: the TSE plans to establish the "TSE Asia Startup Hub"; Nomura has completed its first solicitation and sale of unlisted company stocks; Nordea Asset Management has been named the sole adviser for the new Nissay Asset Management Foreign Equity Climate and Nature Transition Strategy Fund
• Digital Assets: Web3 development platform Crossmint announced its expansion into Japan; Laser Digital is launching a new venture in collaboration with blockchain protocol TruFin Protocol; Komainu announces custody support for USYC, created by Hashnote; SBI Traceability deployed its tracing services “SHIMENAWA” for Tojiro, a specialized knife manufacturer
• The Last Word: Guidelines for AI Operators

Global Financial Centers Index

The 35th edition of Z/Yen’s Global Financial Centres Index (GFCI) has been published , and after arresting its fall and climbing back into the Top 20 six months ago, Tokyo managed to claw back one more spot to 19th place globally. The point differentials among the Top 20 remain quite small, and so the delta to fifth-place San Francisco has held steady at 15 points.

Venture Capital & Private Markets

• Nomura has invested in Teamshares , a U.S. based startup company that offers an employee ownership succession model, about a month after MUFG Innovation Partners (MUIP) had announced their investment; founded in 2019, the Teamshares model aims to address the shortage of successors at baby boomer owned small businesses in the U.S., a challenge that is also prevalent in Japan
• J. Front Retailing, the Development Bank of Japan, and Ignition Point Venture Partners have jointly established a business succession fund and decided to name it the “Pride Fund” (pride in Japan, that is); the partners have commenced full-scale fund operations
• GMO Financial Gate invests in Soft Space , preceding the latter's planned Series C funding round, aiming to promote the adoption of contactless and cashless payments by leveraging the unique strengths of both entities; the companies already partnered on stera tap, Japan’s first MPoC-certified SoftPOS solution; stera is integral to Sumitomo Mitsui Card Company‘s strategy to lead the charge in Japan’s cashless payment revolution
• Crowd Credit and Helicap have signed a new Memorandum of Understanding ; Crowd Credit will introduce potential investors in Japan to Helicap, aiming to raise funds with a target transaction volume of US$50 million; in return, Helicap, through its regulated subsidiaries, will facilitate investment opportunities and prospects in Southeast Asia for Crowd Credit's Japanese investors
• 0G Labs completed their $35M seed fundraise that included gumi Cryptos Capital alongside Hack VC , Bankless Ventures , Delphi, LongHash Ventures , Stanford Blockchain Fund, Polygon Labs, GSR , OKX and others
• MUIP participates in USD 47m Series C for omni-channel InsurTech Qoala ; Qoala completed its Series C funding round, raising USD 47 million led by PayPal Ventures and MassMutual Ventures; the round was joined by MUFG Innovation Partners , Ohana Holdings and existing investors, Flourish Ventures, Eurazeo and AppWorks, echoing confidence in the company’s mission in driving financial inclusion
• Indonesian e-wallet LinkAja secures strategic investment from Mitsui , marking the first investment by a global company in the digital payment platform; this move will enable LinkAja to further fortify its ecosystem and business strategies, including collaborations with its State-owned Enterprises shareholders
• Daiwa Securities will acquire a minority stake in Ambit Finvest , the systemically important Non-Banking Financial Company (NBFC) of the Ambit Group; Ambit and Daiwa aim to seize the growth opportunities in the expanding Indian NBFC sector to contribute to the acceleration of financial inclusion

Insurance

• Mitsui Sumitomo Insurance Company and Aioi Nissay Dowa Insurance, both members of MS&AD Insurance Group Holdings, have jointly issued the “Tomoni Re 2024” catastrophe bonds in Singapore covering domestic natural disaster risks in Japan; this is the 7th issuance for Mitsui Sumitomo Insurance and 3rd issuance for Aioi Nissay Dowa Insurance; Singapore has introduced various initiatives to develop the market for insurance-linked securities, such as an “Insurance Linked Securities Grant Scheme” to subsidize costs of cat bond issuances

Banking

• Sumitomo Mitsui Banking Corporation will begin offering “Social Deposits” for corporate and individual customers in Japan starting April 1, 2024; SMBC has formulated the “SMBC Social Deposit Framework” and obtained an evaluation from a third-party assessment institution; in developing and operating Social Deposits, SMBC has also shared insights with Gojo & Company, Inc. , a company with which it collaborates on financial inclusion in emerging countries
• Sumitomo Mitsui Financial Group plans to enhance its initiatives for sustainability across three key areas: (I) setting medium-term portfolio GHG emissions reduction targets for automobile and steel sectors, (II) revision of policies for specific sectors and businesses (coal-fired power generation, thermal coal, biomass, and human rights), and (III) introduction of environmental and social due diligence
• Nomura, SMFG and MUFG announce employee stock (option) plans ; Nomura talks about a three-year performance evaluation period, and payment primarily in treasury stock (possibly no further vesting period); MUFG reference RSU/ESOP plans prevalent in the US, which could similarly indicate a three-year vesting period, with payment at the end, or delayed by another year or two; SMFG mentions payment at retirement based on the accumulation of "points" by the employee, so their structure appears much more long-term

Payments

• PayPay has started providing the “PayPay Funding” service for PayPay merchants , allowing them to receive up to 1 million yen in advance for their future sales via “PayPay” in as little as a few minutes; this service will be offered on an invitation basis according to the merchant’s usage history of “PayPay”
• JCB and Toyota Coniq Alpha will implement a “Loose Linkage?” proof of concept starting in fiscal year 2024, together with four proof of concept partners, aiming for a society where individuals, not specific business operators, designate the scope of their data to be connected and utilized
• Hitachi Payment?Services has completed the deployment of 10,000 white-label ATMs in India ; operating under the brand name Hitachi Money Spot ATM, it has a strong presence in semi-urban and rural areas, enabling wider accessibility and empowering citizens with convenient?banking services

Sustainability Frameworks

• The Working Group on Impact Investment, established in October 2022, has extensively discussed the balance of social/environmental impact and financial returns in eight meetings; the Financial Services Agency then published the draft of ”Basic Guidelines on Impact Investment” and?solicited comments?between June 30 and October 10, 2023; as a result of further discussion at the ninth Technical Committee, the ”Basic Guidelines on Impact Investment (Impact Finance)” were finalized, as depicted in the graphic above (full text only available in Japanese at this point)
• Following its “Surveys of TCFD Disclosure in Japan ” published in FY2021 and FY2022, Japan Exchange Group has published a “Survey of TCFD Disclosure Using Generative AI,” covering Tokyo Stock Exchange listed companies (2,198 domestic listed companies that submitted Annual Securities Reports between April 1 and October 31, 2023); this is the first survey benefitting from enhanced disclosure requirements, hence the coverage in this year’s survey is much wider than before, and it has become possible to shed light on differences between disclosure rates by market segment, company size, and sector

• The Sustainability Standards Board of Japan (SSBJ) was established in July 2022 to develop Sustainability Disclosure Standards to be applied in Japan and to contribute to the development of international sustainability disclosure standards, following the establishment of the International Sustainability Standards Board (ISSB) ; in developing high-quality and internationally consistent Sustainability Disclosure Standards, the SSBJ concluded that it would be useful for market participants to align the Japanese standards with the ISSB’s IFRS Sustainability Disclosure Standards; accordingly, the SSBJ decided to incorporate all requirements in the IFRS Sustainability Disclosure Standards and to add, when considered necessary, any jurisdiction-specific options the entity can choose to apply

Capital Markets & Asset Management

• The Tokyo Stock Exchange believes that IPOs of attractive companies, both domestic and international, play a vital role for the sustainable development of the financial market, and therefore has been actively promoting IPOs to overseas companies; to further attract cross-border listings, the TSE plans to establish the "TSE Asia Startup Hub" , an ecosystem where TSE and IPO stakeholders collaborate to encourage promising Asian companies to choose the TSE for their IPOs
• Nomura Securities has completed its first solicitation and sale of unlisted company stocks using its stock system for specified investors , which, in addition to qualified institutional investors and listed companies, includes individuals who meet certain criteria such as financial literacy and financial asset size; transactions were executed on Gojo & Company, Inc. and Elephantech Inc. stock
• Nordea Asset Management has been named the sole adviser for the new Nissay Asset Management Foreign Equity Climate and Nature Transition Strategy Fund; the vehicle, aimed at Japanese institutional investors, capitalises on the framework of NAM’s existing Global Climate Engagement strategy, first launched in early 2022

Digital Assets

• Web3 development platform Crossmint announced its expansion into Japan through collaboration with blockchain network Astar Foundation and venture Hakuhodo KEY3; the partnership aims to accelerate enterprise adoption of Web3 services in Japan built on the Astar blockchain
• Laser Digital, Nomura’s digital asset subsidiary, is launching a new venture in collaboration with blockchain protocol TruFin Protocol , a WebN Group incubated company; this initiative leverages Polygon Labs ’s Aggregation Layer (AggLayer) to transform the network’s liquidity potential in the digital economy into an investment opportunity in the analog economy, by introducing the Laser Digital Polygon Adoption Fund
• Komainu, a joint venture between Nomura, blockchain experts Ledger , and digital asset investment manager CoinShares , announces custody support for USYC , created by Hashnote , the on-chain first digital asset manager?built with the support of Cumberland and DRW
• SBI Traceability announced that the tracing services “SHIMENAWA”, which realizes brand protection through advanced technology integration, i.e. blockchain and NFT tags, has been introduced at Tojiro, a specialized knife manufacturer headquartered in Tsubame City, Niigata Prefecture

The Last Word: Guidelines for AI Operators

In their first "Japan IP & Technology Newsletter" of 2024, Anderson Mori & Tomotsune have covered the draft of new "Guidelines for AI Operators " that are currently being finalized based on public comments that were accepted until mid-February. The article posted on the Tokyo FinTech LinkedIn page uses as its basis the wording of the Guidelines at the time of the call for public comments.

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Have an awesome week ahead.